Economics 101
by Lynn Harsh

Few of us are sanguine these days about our national and personal economic condition. Most Americans are hurting and want government to “fix it and fast.” Yet it is government’s meddling that created much of our problem in the first place.

After the 1929 failure of our stock market (due in great part to the Federal Reserve’s quick removal of up to one-third of the nation’s money supply), people suffered in ways few of us can comprehend today. Joblessness, hunger and homelessness dogged previously solvent, hardworking Americans. Government stepped in to manage many of the factors of production, and sometimes whole sectors of the economy. The goal was to help people get back on their feet.

The new programs and policies carried a hefty price tag, and since government has no money of its own, it was necessary to transfer money from segments of the population that still had some to those that did not. As the years went by, greater transfers became necessary to satisfy the growing list of what many believed was government’s responsibility: to clothe, educate, feed and provide work, retirement and health care for every American in need—and many not in need.

To pay for these programs, increasing amounts of money were taken from households and businesses based on the belief that government could spend that money better and more efficiently. But because government is inherently inefficient in delivering most human services, every government-run program grew in size and cost, with little or no equivalent value added. This required tax and regulatory schemes that were able to collect lots of money from businesses and consumers.

Furthermore, it became fashionable to use tax and regulatory policies to reward or penalize consumers and businesses for particular economic decisions. Today, government heavily regulates commerce, redistributes wealth and uses tax policy to shape social policy.

Using taxes to redistribute wealth “fairly” from one economic class to another may sound warm and fuzzy, but it undercuts those who would otherwise use their wealth to create jobs. Fewer entrepreneurs—the genius behind the American economy—can innovate and explore new territory.

The cumulative effect of these decisions means that the average wage earner, counting all levels of government taxation and regulatory costs, loses more than half the fruit of his or her labors to government and its various programs. Furthermore, many business owners strangle in red tape and costly regulatory and tax policies.

While economic consequences have been severe, the social consequences have been devastating.

Compassion for the needy has been relegated to third parties paid through government bureaucracies. Entire industries have been created around not fixing human social and economic problems. Entitlement mindsets have invaded all economic classes, from the poor wanting “free” food and health care, to the wealthy wanting government to bail them out when their homes fall prey to a hurricane or forest fire.

We must get serious about answering a few questions: What is the role of government? If government should do a particular task, can it be hired out, or must government actually do it? Can local government do it better?

Money is limited in good times and bad. When legislators take money from businesses and households, they are saying they need the money more and can spend it better. This is a sobering thought, one this legislative body needs to remember well.

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